eBay to pay out €38.6m 

 
"90% of designer goods on eBay are fake," a French court was told in proceedings brought by global luxury brand conglomerate Moët Hennessy-Louis Vuitton (LVMH) against online giant, eBay.
(4 July '08)

Following the ruling on Monday in France, legal experts warned brand owners of the need to protect their portfolios. The court found against eBay in a dispute with LVMH, the luxury brands group whose portfolio includes TAG Heuer, Louis Vuitton, Kenzo Parfums (below) and Donna Karan.


LVMH alleged that items for sale on eBay included fake Christian Dior, Guerlain, Givenchy and Kenzo perfumes (left).

eBay argued that it spends $20m annually and employs 2,000 people to police the sale of counterfeit goods but to no avail. LVMH was awarded €38.6m (£30.6m).

LVMH argued before the court that 90% of designer goods sold on eBay are fakes. eBay has said that it will appeal the ruling.

Paul Carlyle, who heads the media and technology group at UK law firm, Shepherd and Wedderburn LLP, shared the legal implications of the  decision with RedKarpet.

"This is a slightly surprising decision," said Paul Carlyle (pictured below). "French courts have not traditionally been seen as sympathetic to the needs of brand owners. Previous decisions have been more orientated toward the impact on the consumer.


"This decision provides brand owners with an incentive to review the way in which they enforce the intellectual property protection which their brands enjoy. Counterfeiters take a free ride on the advertising and marketing spend of luxury brands and have a direct, demonstrable impact on profits. In a tighter economic climate where luxury brand purchases are ever less impulsive, the temptation for the consumer to buy a cheap imitation is high."

Despite the ruling being issued in a French court there's a likelihood that the precedent could apply in English courts.

"This ruling has the potential to fundamentally alter the way that online auction sites do business," Carlyle said. "With the finding in one EU member state that eBay’s Verified Rights Owner programme is inadequate, it is more likely that courts in other jurisdictions may make similar findings.

"There is a very real possibility that other luxury brand owners will initiate claims either in their home jurisdiction or in France following this ruling. Brand managers who think that counterfeit versions of their brands are sold on online auction sites should, at the very least, take advice from their group general counsel."


eBay has also attracted the opprobrium of other protective luxury brands in France. Recently, Hermès International in Paris was awarded $31,600 on suing  eBay for fake bags sold online.

"We believe that this ruling represents a loss not only for us but for consumers and small businesses selling online, therefore we will appeal," said eBay following the ruling. "It is clear that eBay has become a focal point for certain brand owners' desire to exact ever greater control over e-commerce. We view these decisions as a step backwards for the consumers and businesses whom we empower everyday", eBay said in a statement.


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